Investors need to take note, as one of the biggest equity research divisions on Wall Street has just turned overwhelmingly negative on equities. And this is not the “stocks will struggle in coming years” kind of call, it is an argument for right now and published yesterday. The bank has lowered its allocation to stocks, saying that the outlook for markets over the next three months is very poor. Morgan Stanley says equities prices are way too high and expectations for major rate cuts are already priced in, leaving little room for appreciation. They also think valuations are too high given deteriorating manufacturing and economic data.
FINSUM: Morgan Stanley is basically saying that the market is primed for disappointment because all the positive outcomes have already been priced in. Not unrealistic.